TIAA-CREF buys SL Green’s 2 Herald Square stake for $365M

Insurance and financial services provider is buyer in deal announced last week

From left: TIAA-CREF logo, 2 Herald Square and Marc Holliday
From left: TIAA-CREF logo, 2 Herald Square and Marc Holliday

The large retirement investment firm TIAA-CREF is the buyer in a $365 million deal to acquire the leased fee interest in 2 Herald Square from SL Green Realty, The Real Deal has learned.

SL Green announced last week that it had sold its leased fee interest in the 365,000-square-foot commercial office building with an alternate address of 1328 Broadway. The transaction was one of three deals that netted the real estate investment trust $240 million.

SL Green also sold 180 Broadway to the LeFrak Organization, as reported by Crain’s, and 985-987 Third Avenue to an undisclosed buyer. The company did not make the buyers public at the time of the announcement, but sources with knowledge of the transaction told The Real Deal TIAA-CREF purchased the lease fee on 2 Herald Square.

Both SL Green and TIAA-CREF declined to comment through spokespeople.

On Thursday, CEO Marc Holliday told analysts on a conference call the buyer of 2 Herald Square is a life insurance company. TIAA-CREF is a leading provider of insurance and retirement plans for professionals in academic, research, medical and cultural fields. It had $569 billion of assets under management as of the end of 2013 and 3.7 million clients in institutional retirement plans.

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The current leaseholder at 2 Herald Square, Sitt Asset Management, has an option to buy the fee position in 2027, said Holliday on the call, adding, “we sort of highly expect that they will exercise that option as does the buyer.”

The annualized cash rent for the property is $11,531,250, according to SL Green’s last annual report covering 2013. SL Green acquired a fee interest in 2 Herald Square in a joint venture partnership in April 2007 for $225 million. The company fully consolidated its position in 2010.

Earlier this year, TIAA-CREF acquired Clarion Partners’ minority stake in the Apple Store building at 401 West 14th Street. The firm also formed a $20 billion joint venture last year with investment management firm Henderson Group to buy and manage commercial and residential real estate.

Steve Kohn, Alex Hernandez, Chris Moyer and Helen Hwang of Cushman & Wakefield’s capital markets group advised SL Green on the deal.